Asia Dry Bulk-Capesize Rates Sliding as Overcapacity Weighs

Posted by Joseph Keefe December 8, 2016

Capesize rates 26-33 pct higher than a year ago, but could fall towards Chinese New Year.

Freight rates for large capesize dry cargo ships on key Asian routes may fall further next week as prospects for a pre-Christmas rally fade with ship supply outpacing cargo demand, ship brokers said.

With Christmas and New Year holidays looming, rates could drop for at least the next six weeks until after Chinese New Year at the end of January, brokers said.

"Rates are likely to meander down until they find support from iron ore and fuel prices," a Singapore-based capesize broker said on Thursday.

Rates from Western Australia to China could drift closer to $4 per tonne from around $6 currently and below $10 for the Brazil-China route from about $12 now before a possible increase after Chinese New Year.

"I don't think owners are too confident. There's limited chartering activity and cargo volumes are not enough to sustain the number of available ships," a Shanghai-based broker said. The Shanghai broker sees a low of around $5 per tonne from Australia and above $11 from Brazil.

Capesize rates are currently 26-33 percent higher than a year ago, chartering data on Thomson Reuters Eikon showed.

China's imports of major commodities including iron ore and coal, the two staple cargoes for capesize and smaller panamax ships, unexpectedly surged in November, customs data showed.

"The capesize market still looks relatively good but people forget how bad it can get," the Singapore broker said. "If charterers have a choice of 10 ships they'll wait until an owner accepts the rate they want to pay."

Rates from Brazil and Australia to China on Wednesday dropped to the lowest since Nov. 10, chartering data showed.

Charter rates for iron ore cargoes from Western Australia-China slipped to $5.94 per tonne on Wednesday from $6.26 per tonne a week ago.

Freight rates from Brazil to China fell to $12.17 per tonne from $13.01 for the same period.

Charter rates for smaller panamax vessels for a north Pacific round-trip voyage were flat at $8,637 per day on Wednesday from $8,594 last week.

Freight rates in the Far East for smaller supramax vessels remained firm with rates of $6,000 per day from India to China and $5,000-$6,000 per day for voyages from China to Southeast Asia, Norwegian ship broker Fearnley said.

The Baltic Exchange's main sea freight index dropped to 1,162 on Wednesday from 1,204 a week ago.